HOUSTON, TEXAS, June 1, 2000—El Paso Merchant Energy Company, a business unit of El Paso Energy Corporation (NYSE:EPG), and Niagara Mohawk Power Corporation, a wholly owned subsidiary of Niagara Mohawk Holdings Inc. (NYSE:NMK), announced that they entered into a seven-month asset management agreement beginning April 1, 2000. El Paso Merchant Energy will provide comprehensive gas supply and storage refill management service to Niagara Mohawk. This service includes managing Niagara Mohawk's existing term supply as well as arranging incremental gas supply, managing interstate transportation, and optimizing underground storage. The executed contracts will be filed with the New York Public Service Commission this month.

Under the agreement, El Paso Merchant Energy will provide bundled gas supply service designed to realize the competitive value of Niagara Mohawk's existing supply, transportation, and underground storage contracts with the ultimate goal of reducing the unit cost of gas for the utility's sales customers. El Paso Merchant Energy will pay Niagara Mohawk a fixed monthly fee for the right to optimize the assets.

"We are excited to have this opportunity to work with Niagara Mohawk," said Greg G. Jenkins, president of El Paso Merchant Energy. "El Paso's ability to manage assets and risk, together with Niagara Mohawk's knowledge of the upstate New York market, will assure cost savings for Niagara Mohawk's ratepayers while allowing El Paso to implement our strategy of providing premium wholesale energy services to our traditional customers."

"Niagara Mohawk is committed to continuous improvement and always seeks better ways to get the job done," said Joe Ash, Niagara Mohawk's vice president of Gas Delivery. "El Paso Merchant Energy has a proven track record in managing the assets of other gas distribution companies. This agreement combines El Paso's considerable resources and strengths with our goal of achieving the lowest possible gas costs for our customers while allowing us to evaluate this type of strategic partnership as a long-term approach to gas supply."

With over $16 billion in assets, El Paso Energy Corporation provides comprehensive energy solutions through its strategic business units: Tennessee Gas Pipeline Company, El Paso Natural Gas Company, Southern Natural Gas Company, El Paso Merchant Energy Company, El Paso Energy International Company, El Paso Field Services Company, and El Paso Production Company. The company owns North America's largest natural gas pipeline system, both in terms of throughput and miles of pipeline, and has operations in natural gas transmission, merchant energy services, power generation, international project development, gas gathering and processing, and gas and oil production. On May 5, the stockholders of both El Paso Energy and The Coastal Corporation overwhelmingly voted in favor of merging the two organizations. The combined company will have assets of $35 billion and be one of the world's leading integrated energy companies. The merger is expected to close in the fourth quarter of this year, concurrent with the completion of regulatory reviews. Visit El Paso Energy's web site at www.epenergy.com.

Niagara Mohawk Power Corp., a wholly owned subsidiary of Niagara Mohawk Holdings Inc. (NYSE:NMK), is a regulated energy delivery company with the largest service area in New York state. The company provides electricity to more than 1.5 million customers across 24,000 square miles of Upstate New York. The company also delivers natural gas to more than 530,000 customers over 4,500 square miles of eastern, central and northern New York.

Niagara Mohawk Power Corporation

Kenneth M. Tompkins
Director, Corporate Communications
Office: (315) 428-3523
Fax: (315) 428-5524

This release includes forward-looking statements and projections, made in reliance on the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The companies have made every reasonable effort to ensure that the information and assumptions on which these statements and projections are based are current, reasonable, and complete. However, a variety of factors could cause actual results to differ materially from the projections, anticipated results or other expectations expressed in this release. While the companies make these statements and projections in good faith, neither the companies nor their managements can guarantee that the anticipated future results will be achieved. Reference should be made to the companies' (and their affiliates') Securities and Exchange Commission filings for additional important factors that may affect actual results.